Economist Notices That The US Is Getting Buried Under Costly, Useless Over-Regulation

from the not-what-we-need dept

The US is often talked about as a major supporter of the "free market," but as we've seen over and over again what we have is really crony capitalism, with lots of efforts being made to protect certain industries through regulation. This hasn't gone unnoticed. The Economist has an article more or less mocking the US for pretending to be all about small government free markets, while really being buried in pointless, confusing and unnecessary regulations:

But red tape in America is no laughing matter. The problem is not the rules that are self-evidently absurd. It is the ones that sound reasonable on their own but impose a huge burden collectively. America is meant to be the home of laissez-faire. Unlike Europeans, whose lives have long been circumscribed by meddling governments and diktats from Brussels, Americans are supposed to be free to choose, for better or for worse. Yet for some time America has been straying from this ideal.

The article points its finger at two key culprits, both of which make sense: politicians who think they can craft perfect legislation to account for every eventuality... and the lobbyists who provide them language to make that possible:

Two forces make American laws too complex. One is hubris. Many lawmakers seem to believe that they can lay down rules to govern every eventuality. Examples range from the merely annoying (eg, a proposed code for nurseries in Colorado that specifies how many crayons each box must contain) to the delusional (eg, the conceit of Dodd-Frank that you can anticipate and ban every nasty trick financiers will dream up in the future). Far from preventing abuses, complexity creates loopholes that the shrewd can abuse with impunity.

The other force that makes American laws complex is lobbying. The government’s drive to micromanage so many activities creates a huge incentive for interest groups to push for special favours. When a bill is hundreds of pages long, it is not hard for congressmen to slip in clauses that benefit their chums and campaign donors. The health-care bill included tons of favours for the pushy. Congress’s last, failed attempt to regulate greenhouse gases was even worse.

These two things are connected, rather than independent, as the article seems to imply. The first one is the key problem. To legislators, creating legislation is the only hammer in their toolbox, so they see every issue as a nail, even when that's rarely the case. And that hubris of being able to create perfect legislation to account for every eventuality is the opening for the lobbyists. Politicians who want to think through every possibility ask the lobbyists to help -- and the lobbyists then have every opportunity to tilt the playing field to their clients, and against the public interest. And that's exactly what happens all too often.

And, of course, if you have any familiarity with these issues, you know that it's incredibly costly:

Complexity costs money. Sarbanes-Oxley, a law aimed at preventing Enron-style frauds, has made it so difficult to list shares on an American stockmarket that firms increasingly look elsewhere or stay private. America’s share of initial public offerings fell from 67% in 2002 (when Sarbox passed) to 16% last year, despite some benign tweaks to the law. A study for the Small Business Administration, a government body, found that regulations in general add $10,585 in costs per employee. It’s a wonder the jobless rate isn’t even higher than it is.

The Economist presents some recommendations on how to fix this. The first is that every law should have a cost-benefit analysis from "an independent watchdog" rather than the current efforts by the CBO. I'm not really convinced that will have much of an impact. We already have CBO estimates, and even if they're not accurate, very few people pay much attention.

They also suggest "the rules need to be much simpler." They suggest that it would be "better to lay down broad goals and prescribe only what is strictly necessary to achieve them." I'm pretty skeptical about this suggestion too. Vague, broadly drafted language leads to uncertainty, and uncertainty can lead to risks and liability... and fear to do things. That wouldn't help. I understand the reasoning here, and if the "broad goals" really are binding, then perhaps this could work somehow, but I think that a better response might be that if the law needs to be so complex, perhaps the law is attacking the wrong issue.

There is one suggestion that makes sense to me, but I don't think it goes far enough:

"All big regulations should also come with sunset clauses, so that they expire after, say, ten years unless Congress explicitly re-authorises them."

We should take that much, much further. First, I don't think it should just be "big regulations." Let's sunset everything, and force Congress to re-evaluate laws already on the books. Along those lines, all new laws (and any re-authorizations of old laws) should come with clear and stated metrics that will be used the next time around to determine if the bill was successful. If the metrics are not met, then the bill should not be allowed to be re-authorized without significant changes. It seems like rules like that might actually take us in a reasonable direction towards passing effective regulations, rather than the mess that we have today. It still amazes me that legislation doesn't already come with metrics to determine if they actually do their job.

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...yeah... Because new laws are always bad...
Lilly Ledbetter Fair Pay Act of 2009, Would hate to have women getting equal pay for equal work; Those silly Red Tape rules and regulations to prevent cronyism, Who doesn't love losing out a contract to the senator's brother (since the sister wouldn't be paid as much otherwise and would have to bid higher than a male); That silly Civil Rights Act from the 60s... Who would want all Americans to not be discriminated against?
[/sarcasm]

Rules and Regulations & laws are generally passed for a good reason. (the reason might be campaign contributions payback... but that is more of an argument for getting money out of politics than it is one against laws).

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Thank you. Yes, there are bad laws, but there are a hell of a lot of good ones, and I guarantee that if we "sunsetted" all of the laws, more good ones would go than bad. You know, those expensive consumer-safety laws? The ones that make it illegal to sell canned goods preserved with formaldihyde?
The laws that would go would be the ones that made it more expensive for big business, because they have lobbyists. The laws that would stay would be the ones that blocked startups and competition, because they don't have lobbyists.

Sorry, you'll have to clean up the inefficiencies another way. Congress is just too corrupt.

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So maybe 'sunset all laws' is a rather broad statement. I can't pretend I'm well versed on the differences between laws, regulations, etc, but stuff like core principles of equalities and freedoms are probably not what the intention of the statement means.

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Althought I agree with the point you are trying to make, I disagree with your example. Let's say, just as an example, I want to hire someone to do a job. 2 people apply, one female and one male. They both have the same aptitude and their resumes are identical. Based on the assumption that women get less pay for the same work, why would I hire the man?

In today's world of optimization and productivity concerns at EVERY major corporation, Less people doing more work, and the need to minimize the costs to keep the shareholders happy. This makes absolutely no sense. If the assumption is true that women make less than men for the same work, then it should be impossible for a man to find work util every woman was employed.

Now as for the Senator's brother, that's just plain and simple nepotism and cronyism. It's not really the same point.

Re: Re: Re: Re: Re: Sarbanes-Oxley should be the first to go

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deliberately listing the ones that failed to doesn't refute my point :P

to the best of my knowledge the NZ government has done a pretty good job on that one, as an example. (admittedly, until the current lot of idiots, who are basically 'US government jr.'. the country would probably be better off if most of them were shot, but we don't have the capacity to do that...)

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This is so wrong. Big Business will police itself, as long as you don't bail it out. Your recession is proof that having the government control the interest rate, encourage home ownership, and in general meddle with the economy only messes it up. Leave business to businesses. They know what they are doing.

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i'd like to point out that 'free and open markets' do NOT stay that way if corporations are left to their own devices within them. proper regulation is required to keep them free and open.

that said, bailing out a failed business is NOT proper regulation. bailing out said businesses Creditors might be, depending on the situation, bailing out the business itself? no. 'too big to fail' is synonymous with 'too big to exist'. that's the point where you should have broken it up into smaller entities a while back.

the US (and world)'s current problem is NOT that the government regulates business. it's that the largest businesses (those most in need of regulation) are in control of the government!

thus the regulation is used, rather than to keep the markets free and open, to support the corporations' natural tendency towards destroying the market around it (Especially competition, which is the only non-governmental force that actually steers corporate behavior at all, and then mostly due to a desire to destroy it) closing it down and removing any sort of choice from the consumer any chance of a competitor arising...

and, in many cases, to legally defraud the public, or at least to concentrate wealth in the hands of the few. (fun thought for consideration: the more concentrated the wealth is, the less it is worth.)

if the corporations no longer control the regulators, the regulations inhibit this behavior rather than encouraging it, which is better for all concerned.

eliminating corporations entirely would be useful. returning them to the ideal of limited duration entites established for a specific purpose who have shareholders entirely as a way to raise funds would be better. (the idea is that the chater says 'the corporation exists to do thing X. once thing X is complete the corporation pays out and stops existing. should the corporation fail to do thing X it shall pay out and stop existing.' thing X is not paying out to the shareholders. it is achieving a specific large scale thing which is beneficial to the public which the government either does not have the funds to do or does not have the right to use public funds for. the shareholders get their dividends as a reward for contributing their personal funds to the project. they are not liable for the failings of the corporation beyond not getting their money back, there is no reason why they should get to control it's actions. )

as you can probably tell, i'm not a fan of modern corporations :P multi-nationals are particularly bad.

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Which government program did more to elevate people than free markets again?

the US (and world)'s current problem is NOT that the government regulates business. it's that the largest businesses (those most in need of regulation) are in control of the government!

Sounds like a perfect argument for truly free markets. When the government has free reign to regulate, there will always be people with the means to entice politicians. Any regulation will always be crafted in a way that helps large companies over small ones.

thus the regulation is used, rather than to keep the markets free and open, to support the corporations' natural tendency towards destroying the market around it (Especially competition, which is the only non-governmental force that actually steers corporate behavior at all, and then mostly due to a desire to destroy it) closing it down and removing any sort of choice from the consumer any chance of a competitor arising...

Corporations don't destroy markets. That would entail destroying their customers. A market doesn't go away if there is only one supplier. That is plain silly. Corporations will try to take over a market and destroy their competition. Companies pushing regulation making the cost of entry prohibitive to anyone not already engaged in that market is, and will sadly continue to be, a favorite way to limit competition. Your quote is actually a better argument against regulation than for regulation.

if the corporations no longer control the regulators, the regulations inhibit this behavior rather than encouraging it, which is better for all concerned.

Assuming regulators are completely impartial, and regulations apply to all businesses equally. To be frank, I'm probably more likely to be hit by lightning twice today than for the previous sentence to be true.

eliminating corporations entirely would be useful....

No. Think about how much wasted energy there would be building an organization and tearing it down again. Employees hired, and then fired. It would be a truly epic waste of time and energy. I think anyone with an iPod is pretty happy that Apple didn't quit after deciding they failed to do "X".

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... note that eliminating the limited liability 'only responsibility is to make money and only way to punish is to deprive of money which is simply a tax' corporation is not the same as eliminating the business. just means there's actually someone who can be held accountable for their screw-ups and punishments that can be implemented that cannot be simply written off as a 'cost of doing business'.

what would have happened is that Apple would have been forced to be a partnership or take loans, rather than forming a corporation, or, if it managed to get the necessary charter, would have ceased to be a corporation. 'paying out' could just as easily have been 'broken up into those parts which could function individually and those parts handed off to the investors as non-corporate businesses' or 'investors take ownership but also gain liability' or 'government takes ownership, pays off investors, operation continues' or any other number of variations.

the point is that corporations existing entirely to make money and responsible only to those who profit from their behavior are Dangerous to the public in general. even the law does not affect them. any violation of the law that is sufficiently profitable they will carry out simply because it pays for itself. there is no other penalty.

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Anything overly large, except for my bank account, is bad. Corporation, Government, TAM's Ego, A cancerous tumor. There is a critical mass at which the cost to operate exceeds the cost of the product/purpose/outcome. The ends most definately do NOT justify the means.

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if it's doing the same after being the cause of a global economic meltdown then the people in charge of it are lucky that they live in a modern western state, however corrupt, as in earlier days they'd be executed out of hand for such behavior most of the time.

I'd also have to say that having an Empire larger than some continent is probably getting that way when it comes to centralized governments. (seriously, what the hell does the USA DO with 240 different governmental organizations?!)

when an entity's existence and behaviour are detrimental to the public good, economic or otherwise, and its own inertia prevents it from changing those facts, it's also probably too large.

certainly these are the points where it should be looked at very carefully, if not before.

I heard another idea, apparently in Sweden some laws need to different congresses to pass the same bill to become law, that means one congress cannot pass some laws unilaterally and gives people time to vote politicians out of congress if they voted against the people's wishes.

Now that is something I could get behind.

Also I like the idea of sunset laws that have metrics guiding their renewels, every law should have monitoring clauses in it so they have metrics and can be watched for impact positive or negative.

Of course those things comes with their own unknown pitfalls but seriously, what is there to lose?

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Regarding the rules in Sweden:

It only applies to changes to the "constitution". The same "constitution" that is completely worthless, since you can't challenge a law based on the "constitution" unless it's "obvious". As I understand it, as long as the politicians don't write "and of course this new law breaks the constitution, so suck it" in the laws, there is nothing anyone can do.

It also turns out that you can get around this by getting a 75% (I think it was) vote for the changes. Mind you, this means that 75% of the members of parliament present votes yes, not that 75% of the parliament votes yes. This difference is the reason that we ratified the Lissabon Treaty, basically they sent enough people home so that the vote passed. *sighs*

Mind you that it has been a while since I looked into these details deeply, and I am not a lawyer (although some of my "sources" are) so I may have misunderstood some things.

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don't know about Sweden, but here the constitution (or at least, the various random documents that are listed as 'part of the constitution' by whichever act they passed to try and formalize it) covers such things as how elections are to be conducted and the powers of the various aspects of government, at the very least.

one can't really challenge laws as unconstitutional, but it does make it more difficult for a government to, say, ban opposing political parties.

(of course, to be fair, the act which formalizes the constitution is 'entrenched' making it Very difficult, though not quite impossible, to repeal. too bad the law that is used to entrench other laws is not recursive, and thus is not itself entrenched, meaning it can be repealed by a simple majority... stripping that protection from all the others.)

if that applies to the Swedish constitution as well it's not exactly worthless.

that said, the very Idea of a quorum seems offensive to me. it strikes me that, in order to pass a change, you should need a true majority to actively vote in favor of doing so. if less than 50%+1 of the people who can cast votes show up/do so, then you do not have a majority and should not be able to change it. there's too many tricks one can pull to ensure that only enough people show up to allow the vote to take place, and that everyone in favor of it shows up while as few people as possible who are against it do. Quorums based systems just seem far too ripe for abuse.

(i've also noticed that people tend to 'abstain' from issues only when they know which way the majority's going to go but are Afraid of the side they would be voting against. possibly only of souring relations with them, but even so.)

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I like the idea of sunsetting and the idea of metrics, but laws can be very complex, and a change in one, might very well mean that another will fail where it was succeeding or succeed where it was failing. For example, on the one hand, the Fed is deliberately causing inflation to keep the economy growing. Inflation is a disincentive to save. On the other hand, you have all sorts of tax breaks for saving from 401Ks to IRA accounts, etc. Get rid of the deliberate inflation and suddenly saving would become a much bigger priority for a lot of people. Get rid of IRAs and suddenly saving would happen a lot less.

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i believe another significant point was that the laws need to be less complex.

even so, if the old law is failing because something else was changed, then that means it needs to be rewritten to accommodate the change, and Still shouldn't be approved 'as is'.

also, inflation doesn't keep an economy growing. a growing economy Causes inflation, but inflation doesn't keep the economy growing and may even slow it. what it Does do is functionally reduce the government's debts due to the debt being a fixed number but their tax take going up with the inflation, and strip any meaningful point away from the idea of savings. which encourages borrowing to pay for things instead. which does help the economy a bit, for a while, but is all to easy to lose control of, causing crashes.

I think I saw a Wired article about how the loss of manufacturing capabilities are also a loss of expertise in production which means less discoveries and less influence on the direction things go. You can design things all you want but if you can't manufacture them what is the point?

And one thing that keeps prices high is regulation, another is the endless stream of "exclusive"(as in exclusionary) deals people make from IP to contracts that are allowed, I feel that IP law only serves one purpose and that is to allow one entity to chose another place to manufacture something while excluding every other competitor from that market, that is the real danger to any economy.

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While the loss of manufacturing capability is a concern, the greater concern is the government's willingness to allow domestic industries to exploit the lack of regulation in other nations to make their products there and increase profit. While I believe that some level of exporting capability benefits the U.S. I wonder why most industries aren't force to apply at least basic work and safety standards to any factory anywhere as a condition of importing goods.

This is the crux of the problem. Lawmakers need money to get elected, and the average Joe doesn't fund multi-million dollar election campaigns. The key to fixing the regulatory problems and add more fairness, is to find ways to reduce the value, to politicians, of money versus the public good .

I think sunsetting built in with specific goals should happen.
I think another needed change is everything in the bill needs to deal directly with the bill, not slipping in an earmark for a museum of great polka players from utah.

I think there is a medium happy place in the language used being to specific and to broad. You can not predict everything that might come, but you can go back to the "spirit" of the law rather than trying to use 1000 legal terms to be super specific, and ending up with a loophole big enough to drive a truck through.

If the authorization for TSA actually had to come back up, and there was a parade of the complete record of what a farce it had become we might be better off today.

Imagine if they passed a law demanding that suppliers actually deliver products on time and working as advertised. How much money would we be getting back for the damn puffer machines that are sitting in warehouses, while we still pay the contract for failed tech.

Maybe it is time to listen to all of the people claiming they can be the bestest president because they ran a corporation. In a corporation when a supplier fails to deliver, you have a contract with penalties and you can sue them for breech. Rather than the we just fund it, if it doesn't work we'll just spend more on the next new shiny thing someone shows us.

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in the "good" way where its not just lining their pockets, but it creates the idea that if someone stiffs you on a contract you do not keep paying them and warehouse the crap they foisted on you.
That there is actual accountability, real reports on progress and failures.

And the CEOs work to make themselves and the stockholders better off, I picture us as the stockholders.

yes, but ...

I agree with much of what you said here, but some laws are so solidly based on a common subset of morality that I just cant imagine any sort of metric that could lead to any serious question. Obvious example: "Thou shall not kill". Murder will stay illegal, no matter what statistics show. Any alternative is unthinkable.

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Murder will stay illegal, no matter what statistics show. Any alternative is unthinkable.

Yes - but you are only thinking about the obvious examples - there are plenty of grey areas around the level of intent required for murder - as opposed to manslaughter - and the law on mercy killing varies from country to country.

Re: yes, but ...

Explain the Death Penalty.

Legislating morality tends to be the problem. Someone with a small amount of a drugs faces X years in jail, often more time than people who commit violent acts.

As a society we can agree on somethings, but we often pass laws in a panic (helped along by the media frenzy) and are blind to what they will become. And then we can't change it because then we might look soft on terrorism and not get reelected. A sunset provision means they HAVE to face it, and look at how well it actually did what it was supposed to do.

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except, you know, you DIDN'T.

if someone attacks you with intent to kill, and successfully kills you, outside of a war where you are combatants on opposing sides (and various sundry other related situations) they have committed murder.

if someone attacks you with intent to kill under the same situation and you fight back and kill them, it is not murder. it cannot be. they were the one who chose to initiate a fight to the death, and they lost. the entered into it voluntarily. you did not. you were forced into it by their attack.

if you cannot see the difference i can only hope you never EVER end up on a jury.

....

or in a situation where someone is trying to kill one of your family members with a weapon they know how to use.
(i'm not particularly worried if they come after You, however. dieing for your beliefs is entirely your right, after all.)

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i'm not particularly worried if they come after You, however. dieing for your beliefs is entirely your right, after all.

Despite your venom I would still try to help if "they" came after you.

if someone attacks you with intent to kill under the same situation and you fight back and kill them, it is not murder. it cannot be. they were the one who chose to initiate a fight to the death, and they lost. the entered into it voluntarily. you did not. you were forced into it by their attack.

I never said wouldn't murder in self defense, or to save a family member. If given no alternative I probably would murder someone while defending myself or family. I would also expect to be arrested for the crime. Even if my crime was committed in self defense, and I didn't have to stand before my peers for judgement, I would still know that another person died by my hand. I'm still guilty.

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"...but some laws are so solidly based on a common subset of morality that I just cant imagine any sort of metric that could lead to any serious question. Obvious example: "Thou shall not kill". Murder will stay illegal, no matter what statistics show."

Re: yes, but ...

please note that the biblical law people love to misquote with this line is actually 'thou shalt not Murder'. killing the enemy in a battle or executions as the end result of legitimate judicial proceedings (or animal sacrifice. or killing animals so you can eat them... or any number of other things really) are not included.

Just link at RIM

Records and Information Management has to contend with over 15,000 local and national laws for Information management nationwide. That is more than all other countries combined...just for one area of the law.

Google, Microsoft and Netflix are pushing for an standard to create DRM for HTML5.

Nothing can go wrong with that. Except the crying fox and the guy from Google calling it "unethical" despite his own company pushing for it.

That is one place I love over regulation is the entertainment industry they are making it their "product" so difficult to use and access that naturally what will happen is people going elsewhere and start producing their own open content.

Heck, it can happen in other fields too, like medicine. I wonder when people will realize that they can produce drugs at home.

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Sunset provisions don't mean that a law will expire, just that it needs to be reauthorized to remain in effect. And yes, it would probably be worthwhile to include such provisions in everything, even prohibitions on treason and smuggling. That can help cut down on the legal clutter of poorly considered or outdated laws (consider, we don't have much need for regulation of horse and buggy traffic any longer). It would also encourage continuous analysis and tweaking of the details of laws which we still find mostly useful (making it more likely that such minutiae as sentencing guidelines will be revised when they've gone overboard).

With the metrics, I do think they'd be a good idea, but it'd be harder to make them strict rules than Mike implies. The problem being that, since new laws have equal authority to old laws, Congress is never truly bound by any restrictions created by its previous incarnations. Even so, by passing laws with clearly defined metrics and standards for success, we would create much more solid ground arguments for or against specific measures. And that makes it easier to hold lawmakers accountable to their own opinions and decisions. It would be much harder for prohibitionists (of anything) to argue for continued strict enforcement if their past laws came with measurable, stated objectives like "reduce consumption/infringement by 20% from levels in X year", but was then shown to have had negligible impact.

Both of these sorts of measures don't guarantee better laws, and they certainly require a dedicated media and attentive public to hold lawmakers' feet to the fire. But they would certainly make it much easier for us to do exactly that. I, for one, think that's a worthy goal.

Deregulation got us into this economic mess. This is one of the first times, this blog has hit a sour note. Regulation is what protects the consumer and business from cut-throat corporations. To imagine free market conditions just go back in history to the Great Depression. Free market is another name for greed.

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Deregulation( regulations also)is not what got us into this mess for me its the lack of transparency, openness and simplicity is the root issues. So into latter is introduced and followed upon correctly in wont matter.

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In this case it was a combination of the removal of restraints on commercial banking in the United States and Europe that set the stage for the crash in 2008. Add to that the mistaken notion that banks could and would regulate themselves to ensure that bank failures of that scale would never occur or that failures on the extent of 1929 would ever occur again.

Banks in the United States ceased to be beholden to their depositors and followed the path that publicly traded companies must follow which is create the most wealth possible for their shareholders.

But banking isn't as simple as other businesses as they stand in the centre of the economy, the business that allow other businesses to work and fund each other and pay wages.

(Yeah, I know, way to simple but it's essentially it.)

Nothing made sure that derivatives trading and what was contained in the derivatives was worth anything transparent.

Nothing seemed to make sure that currency, derivative and other plays didn't become the central reason that, it seems, many commercial banks continued to exist and to make such incredible profits. (I won't mention obscene salaries other than to point them out.)

What happened was, that contrary to the fairy tale of the deregulation period was that banks couldn't and didn't regulate or restrain themselves.

Canada gets a lot of kudos for keeping banking tightly regulated and avoiding lot of the mess because of it but it was a very close call, took public and,to a large extent, shareholder concerns to stop it from happening. We came within a hair of going the way the United States and large parts of Europe did. More by luck than by good planning.

There's throwing out regulations that don't work or are duplicated across jurisdictions with just enough of a differences in them to make them a costly plain.

In hindsight banking regulation was working. Maybe not perfectly but working. It was an easy target though. So...out it went. And...here we are.

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Sorry but regulations also hamper the consumer and business. No one is saying there should be NO regulations, just that the regulations need to well thoughtout, have a definite goal in mind, and that they have a time limit because situations change and what was good for America 50 years ago isn't necessarily what was good for America 25 years ago or today.

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actually, some people Are saying that, which is problematic.

your point still holds though.

save that it's a bit of a toss up to me, whether that first sentence should be "Sorry, but Bad regulations also hamper the consumer..." or "... regulations also hamper the consumer and businesses, because sometimes failure to do so is worse." only better written, of course.

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Bad regulations and lack of enforcement are what got you into this economic mess. It's been argued that Canada's financial sector has fewer but better regulations, and that is one of the reasons why it fared much better than the US or Europe.

Regarding the Great Depression, plenty of people agree that it was exacerbated by governments introducing protectionist policies and tariffs. Again terrible regulations are just bad as no regulation or enforcement.

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protectionist policies and tariffs are great things. ... ... when applied Properly. (and that's protection of your economic capacity, not of some specific industry or lobby or business.)

the main problem is that modern economics is mostly complete bunk but has been used as the basis for most of these decisions, combined with the related problem of an inability to understand that the Nation is NOT a meaningful economic entity, combined with regulatory capture and general ignorance leading to, as noted with the bad regulations, poorly applied measures.

tariffs should be introduced when they encourage import replacement. a lack of them will, in fact, Cripple a weaker city-region's ability to grow in the face of conveniant trade for the consumer with another city which, for whatever reason, produces things cheaper. free trade actually inverts the primary step of the economic growth cycle, which is import replacement. (unless, of course, you're already the powerhouse in that industry and no one can undercut or outproduce you...)

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You're making "deregulation" into a straw-man. The problem isn't that businesses in the United States are regulated, it's that they're badly regulated. It's that corporations have to spend millions of dollars annually to hire armies of lawyers just to figure out how to comply with the law, and with little reassurance that they won't still be sued because someone else's army of lawyers has a different interpretation.

"Overregulation" in the context of the Economist article and Mike's post doesn't mean the restrictions imposed by these rules are necessarily onerous. Rather, it means that the rules are so hideously complicated and poorly written that fewer and fewer people have a solid idea of what those restrictions even are in the first place. To quote from the original article:

The law that set up America's banking system in 1864 ran to 29 pages; the Federal Reserve Act of 1913 went to 32 pages; the Banking Act that transformed American finance after the Wall Street Crash, commonly known as the Glass-Steagall act, spread out to 37 pages. Dodd-Frank is 848 pages long.

It then goes on to explain that much of those 848 pages only lay out directives for agencies of the bureaucracies to create their own more in-depth rules; that so far, multiple agencies have produced competing supplements clarifying only some of the needed sections, but already adding hundreds of new pages to the regulation each.

Whatever noble ideals may have led to these sorts of rules, the legal nightmare they're creating is not actually improving the situation. The focus needs to be on better regulation, not simply more or less.

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Regulation is a means of the crony capitalistic monopolies to prevent competition. Large corporations essentially get their politicians into legislative/executive leadership and push regulations(laws) that only somebody with their resources can handle. The lumbering bureaucracy of a large corporation does not allow for quick/risky innovation. They would much rather keep milking their monopoly rents than innovate. The barrier to entry for an upstart willing to take risks and innovate is set too high with the continued piling of regulations.

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it is a fault with the oversized and outdate model that the US government is built upon (the constitution itself is good, the rest, not so much.).

this fault makes it Very Easy to attain a state of regulatory capture.

once that state is attained, the Problem is that the ones who should be being regulated by an outside force are writing the regulations, or at least controlling the flow of information to those who do.

this leads to BAD regulations.

if you eliminate the capture issue, regulation suddenly becomes a Very Good Thing. (for instance: it's the main reason NZ's telecommunications system wasn't immediately asset stripped and run into the ground upon privatization. the railways here did NOT get the accompanying regulation when they were privatized and were Gutted. in both cases said infrastructure was bought up by American interests, though the railways were then sold to an Australian company who Tried to make the resulting mess profitable, but couldn't and eventually bailed. (at one point they sold the Tracks back to the government for a single NZ dollar. the government took on all responcibility for maintaince costs etc. for the tracks. they Still couldn't bring it back up to profitability. though it's debateable if the railways ever were profitable. reality was that they started out as a government owned piece of infrastructure who's primary purpose was to move stuff around to facilitate OTHER THINGS making a profit. ... it was also used as a sort of welfare program by being a bit of an employment sink. so it's not really surprising that the only way an american owner saw to make a profit was to asset-strip it.))

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STUPID* regulations are a bad thing.
CORRUPT regulations are a bad thing
GOOD** regulations are a GOOD thing.

* (poorly thought out, without properly taking preexisting regulations into account. or just a terrible idea.)
**(intelligently designed and applied to the correct things in ways that actually aid the public good)

this is a fairly fundamental concept that apparently some people are too thick to grasp. i mean, it's hardly complicated.

there is also the nature of the entities responsible for enforcing them to consider.

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As someone who is too lazy and ungrateful that you can't stand that an opinion blog has more than one narrow topic that obsesses you, please feel free to take some time away from this blog and read a grammar book or two.

Too much ideology.

The problem here is that the only politicians who actually talk about over-regulation are essentially batshit-insane. They go around talking about idiotic stuff like killing off the EPA and ending public schooling, basically turning the very idea of "ending regulation" into a non starter for anyone who has children or lives near any kind of factory or power plant. This is yet another great example of how policy dictated by blind ideology (in this case economic libertarianism) can easily end up missing the mark entirely. In short, if you want to fix the problem, the first thing you have to do is leave your simple minded black and white ideologies at the door.

Re: Too much ideology.

You have a really misguided view of what it means to ask for less regulation. While many of those people asking for it also look at Nationalized education and EPA guidelines as outside the Federal government's Constitutional bounds, those positions are not due to their deregulation philosophy.

Re: Re: Too much ideology.

I think you misunderstand Wayne's point.

Consider the "spokes people" that we have who call for "less regulation". These are the names and faces associated with the call for less regulation, for better or worse. And these names and faces call for abolishing regulations that the people like.

If you believe there's a better way to call for better regulation, then by all means, please become the new spokes person for better regulation. I would love for a sane voice to be heard instead of the insane voices.

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actually, politicians listening to economists is part of the problem.

they'd be better off listening to historians and statisticians. They'll actually give you a reasonably accurate idea of how stuff works. economists mostly give you a load of ideological rubbish that fails to line up with reality. (if you're Lucky they'll manage to accurately describe the current situation. if you want how you got there you're dreaming. if you think they actually know how to get where you want to be from here you're outright disillusion.)

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well, there might be some. surprisingly few seem to see fit to make use of it though.

there seems to be something of a standing mentality of 'when reality does not fit the model, reality is wrong' in a lot of schools of economic thought.

it's about the only 'science' where this is accepted logic.

i recomend the book 'Economyths' (or possibly Econo Myths. the title on the cover is layed out a bit oddly) for further explanation of this one. (probably can be found in a public library. it's fairly recent and written for public consumption, not as a purely academic publication.)

Far from preventing abuses, complexity creates loopholes that the shrewd can abuse with impunity.

Of course. If there weren't any, there would be no point. Who provides the language again? Of right, the same people who "abuse" said "loopholes" (read: use doors left open for themselves or their friends).

Quote a big article that would have better been title "USA: Corruption explained".

Maybe I'm being naive

Of course there is the flip side. High amounts of regulation require companies to hire experts to help navigate the compliance issues, so you end up with people being employed because of the regulations.

Not everyone can be a producer because not enough things need producing. The inefficiencies can increase general employment.

Yes it is parasitic in nature but I've never been convinced that there are enough jobs available or possible in productive industries. The inefficiency spreads the wealth a bit further meaning you have more people employed.

Re: Maybe I'm being naive

People "employed" to help those comply with government taxes and regulation are a drag on the economy, because the money spent doesn't generate revenue, it doesn't improve the product the company sells, and most of all, it reduce the number of people a company can employ to do a job.

Re: Maybe I'm being naive

I have long believed exactly this. We simply have too many people and not enough productive work for them to do (especially since we began off-shoring tons of work). In essence, we have to create fake jobs in order to buff employment; cue sprawling bureaucracy to the "rescue".

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that's actually a legitimate problem. particularly noticeable if you import tech upgrades in rural agriculture at a time when there is not corrisponding growth in cities to soak up the now free workforce.

Every development, or near enough, in agriculture that has increased yields has Also reduced the number of people needed to do the work. if there aren't new jobs for them in growing cities at the time they become an economic drain if society supports them, and a major issue in other ways if it doesn't.

of course, an excess of bad regulation and a generally lack of understanding of reality has lead to a situation where few US cities are actually growing, to the best of my knowledge, those that are aren't growing fast enough, and the industries that could Change that are the ones the regulations and stuff cripple, preventing that growth.

every time you create an actual, productive job in a city, especially if it's New work rather than just More work, you actually create several, as there's that much more food etc to be bought and moved around to supply the workers if nothing else. far more likely if it's a new business is that other businesses will expand or be created to fill in it's supply chain. constant pushes by big businesses to squash such new businesses and constantly make themselves more 'efficiant' (which usually involves laying people off) prevent this.

which leads to insuffciant employment

which, of course, among other things, leads to less money moving through the economy, hence, recession.

excuse me if this isn't as coherant as it might be. it's getting on towards 7am and i've not slept yet.

“It will be of little avail to the people, that the laws are made by men of their own choice, if the laws be so voluminous that they cannot be read, or so incoherent that they cannot be understood; if they be repealed or revised before they are promulgated, or undergo such incessant changes that no man, who knows what the law is to-day, can guess what it will be to-morrow. Law is defined to be a rule of action; but how can that be a rule, which is little known, and less fixed?” – James Madison

Whilst I'm no supporter of small government for small government's sake, I agree with the suggestion that most legislative detail should be dropped in favor of overarching principles. The constitution does that at a high level, so why can't it be done at a per legislation level? To suggest that such a move would increase risk is demonstrative of the cynicism in the legal process. Loopholes are there because of the detail, not in spite of it.

What does it say about the US as a country that you have unnecessary and over-complicated laws that regulate what a company can and cannot do in every area except how they treat their employees? I suppose if someone proposed a federal-level limit on working hours, mandatory notice periods and severance pay or required employers to demonstrate valid reasons when firing someone there'd be an outcry about needless red-tape having a chilling effect on new businesses or some such crap.

Another parallel with software dev...

Along those lines, all new laws (and any re-authorizations of old laws) should come with clear and stated metrics that will be used the next time around to determine if the bill was successful. If the metrics are not met, then the bill should not be allowed to be re-authorized without significant changes.

Along those lines, all new laws (and any re-authorizations of old laws) should come with clear and stated metrics that will be used the next time around to determine if the bill was successful. If the metrics are not met, then the bill should not be allowed to be re-authorized without significant changes.

I LOVE this idea. I've had similar thoughts myself.

In particular, I think we should do this to the entirety of USCFR, all Titles. On Copyright and Patent laws, for example, effective metrics could be to require that the actual economic benefits, as measured by a diverse team of economic analysts (from different backgrounds in academia and business, as well as government), are used to determine what new changes must be made to the laws.

That would be an excellent way to lead to clearer, stronger, more sensible laws that benefit everyone, and not just "stakeholders."